Most route deals are "cash-free, debt-free with a normalized working capital target." Translation: at close, the buyer assumes a baseline of working capital (prepaid customer revenue, deposits, etc.) and the price gets adjusted up or down for any deviation.
Why it matters. If a customer prepaid 6 months of service in January and you close in March, the buyer is on the hook to deliver 4 months of service the seller already collected for. Without a working-capital true-up, the buyer effectively pays for that revenue twice.
Common items.
- Prepaid customer revenue (advance payments for service not yet delivered)
- Customer deposits or credits
- Outstanding accounts receivable (often excluded, seller keeps and collects)
- Inventory (chemicals, parts) on hand
- Prepaid software subscriptions
The mechanics. APA defines a "target" working capital figure (often the trailing 12-month average). On close day, both sides agree to an estimated close-date balance sheet. Within 60–90 days, an actual balance sheet is finalized; the difference flows as a payment one direction or the other.
Typical adjustment size. $5k–$30k for a mid-size route. Worth getting right.
Pitfalls. Sellers who collected a big batch of prepaids right before close (artificially boosting cash, creating buyer liability). Buyers who don't read the working capital schedule carefully. Disputes over what's a current vs. long-term liability.
Get an accountant on each side reviewing the working capital schedule before signing the APA.